Church of Scientology of California v. United States

PETITIONER:Church of Scientology of California
RESPONDENT:United States et al.
LOCATION:North Carolina General Assembly

DOCKET NO.: 91-946
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 506 US 9 (1992)
ARGUED: Oct 06, 1992
DECIDED: Nov 16, 1992

ADVOCATES:
Eric M. Lieberman – on behalf of the Petitioner
Lawrence G. Wallace – on behalf of the Respondent

Facts of the case

Question

Audio Transcription for Oral Argument – October 06, 1992 in Church of Scientology of California v. United States

William H. Rehnquist:

We’ll hear argument next in No. 91-946, Church of Scientology of California v. United States and Frank S. Zolin.

Mr. Lieberman, you may proceed whenever you’re ready.

Eric M. Lieberman:

Thank you.

Mr. Justice and may it… Mr. Chief Justice, and may it please the Court:

This case raises the question whether compliance with a district court order enforcing an Internal Revenue Service summons renders any subsequent appeal moot.

The district court below on remand enforced an IRS summons for production of audio tapes held by a disinterested third party record holder, the clerk of the Superior Court of California.

While the case was on appeal, after the notice of appeal was filed, the clerk of the Superior Court complied with the district court’s order and permitted the IRS to inspect and copy the tapes.

Subsequently, the Ninth Circuit Court of Appeals dismissed the appeal from the production order as moot without considering or hearing argument on the merits.

In doing so, the court of appeals held that once a district court enforces an Internal Revenue Service summons for the production of documents, and once the documents are turned over the IRS by either the taxpayer or by a disinterested third-party record holder, the case becomes moot.

This rule applies no matter what proprietary, privacy, or other interests the taxpayer may have in the documents and, of course, no matter how meritorious the taxpayer’s appeal may be on the merits, even if the taxpayer is claiming privilege, IRS bad faith, or that there is no legitimate, ongoing Internal Revenue Service investigation.

The court of appeals’ rule here is contrary to well-established mootness doctrine as enunciated by this Court and by the lower Federal courts.

Determination of whether a case is moot has long rested on two interrelated considerations: first, the existence of an actual, live controversy between the parties; and second, whether the courts may grant any effectual relief to the prevailing party.

The emphasis here is upon the question of whether any relief may be afforded even if it is only partial relief or relief other than that originally sought at the outset of the case.

Sandra Day O’Connor:

Well, Mr. Lieberman, I take it all the issues on the merits in this litigation are finished.

They’re decided.

They’re resolved, are they not?

Eric M. Lieberman:

Well, no, Your Honor, I don’t believe that’s true.

First of all, when this Court decided the first Zolin case, it found that in deciding the crime-fraud issue on an attorney-client privilege issue, the district court could look at any evidence not privileged and lawfully obtained by the Government, and it specifically noted that the question of whether the partial transcripts in this case were lawfully obtained.

It then remanded to the Ninth Circuit, which again declined to reach the issue of whether the transcripts were lawfully obtained, and remanded to the district court for determination of whatever other objections the parties may raise, specifically noting that it was not reaching that particular issue.

Secondly–

Anthony M. Kennedy:

And you did not take… certiorari was not granted from that order.

That order is final.

That’s the June 20 order, and that is final.

Eric M. Lieberman:

–That’s correct, Your Honor.

That’s correct.

But certiorari was not sought on that issue.

Anthony M. Kennedy:

So, it’s the law of the case that the court is not going to consider these transcripts.

Eric M. Lieberman:

Oh, no, Your Honor.

We did not seek certiorari on that issue, and the court of appeals did not hold that that issue was precluded from the district court.

It simply said on this appeal, we are not going to be considering that issue.

Eric M. Lieberman:

It did not say that the issue had been waived, and it remanded to the district court to consider that issue and any other objections the party might raise.

In our petition for certiorari from that particular Ninth Circuit Court of Appeals decision, the question of whether or not the transcripts had been obtained lawfully, either on the merits or how it was dealt with procedurally, was not even raised.

Now, the other issue–

Anthony M. Kennedy:

Well, but isn’t that the problem?

You didn’t even raise it in your original appeal.

Eric M. Lieberman:

–Well, there was no reason to, Your Honor, because we were being remanded for the opportunity to raise it in the district court.

The court of appeals did not preclude us from raising it on the remand that the court of appeals was then ordering to the district court.

The court of appeals said subject to whatever other issues the parties may raise, and footnoted right at that point, that it is not reaching the issue of unlawfully obtained.

It does not say it is precluded.

Anthony M. Kennedy:

Are these transcripts just duplicate copies of the materials that are… the principal materials in issue?

Eric M. Lieberman:

Well, they’re partial transcripts, Your Honor, and–

Anthony M. Kennedy:

So, everything in the transcript was covered by the documents themselves, and we’ve said you can look at the documents themselves in order to determine the privilege.

So it seems to me that that’s another reason this case is over no matter what we do.

Eric M. Lieberman:

–Well, one thing that we were urging below, Your Honor, was that the district court look at the entire tapes because we believe that they would show that the privilege still remained.

Now, if it’s true that it was improper for the court of appeals to look at the partial transcripts, then the whole issue of looking… of what evidence the district court has available to it to look at becomes a live issue, and it must look then, if it is going to look at anything, at the entire case.

But there is another issue… live issue before the district court as well, which arose even subsequent to the Ninth Circuit’s decision, and that issue is whether or not there is at the time of the production order in this case, whether there was a live, ongoing Internal Revenue Service investigation.

As we showed to the district court, which refused to consider the issue on the merits–

William H. Rehnquist:

But if the district court wouldn’t consider it, and you say it has happened since the Ninth Circuit ruled in this case that we’re hearing now–

Eric M. Lieberman:

–It gets a little confusing, Your Honor.

William H. Rehnquist:

–It certainly does.

Eric M. Lieberman:

Since the Ninth Circuit ruled and the opinion reported at 905 F. 2d, which is not the opinion from which this certiorari petition was granted, the Ninth Circuit remanded to the district court.

When the case was back before the district court, evidence was developed at the… from the testimony of Internal Revenue Service agents in other cases that there was no ongoing investigation.

We wished then to raise with the district court that there no longer could be a basis for an order disclosing documents since there was no longer a legitimate purpose.

That issue was denied us by the district court.

That was the… one of the issues we wished to raise on the merits on the appeal back to the Ninth Circuit, which the Ninth Circuit refused to hear on the grounds that the case was now moot because the IRS now had the documents.

William H. Rehnquist:

Well, what relief could the Ninth Circuit have granted you had it heard your appeal on the merits?

Eric M. Lieberman:

The Ninth Circuit could have granted us the following relief.

One, it could have held that there… at the time of the production order, there was no… we had proved that there was no ongoing legitimate Internal Revenue Service investigation.

William H. Rehnquist:

What good would that do you?

Eric M. Lieberman:

The IRS wouldn’t get the documents.

William H. Rehnquist:

But they have the documents, don’t they?

Eric M. Lieberman:

Well, but… oh, and then it could have required the IRS to return the documents and the copies, just as this Court ordered, for example, the Justice Department to do in the Sells case.

William H. Rehnquist:

Well, but the documents wouldn’t go to you.

They’d go to the clerk of the Superior Court of Los Angeles County, wouldn’t they?

Eric M. Lieberman:

Under seal, Your Honor.

William H. Rehnquist:

Well, what good would that have done you?

Eric M. Lieberman:

It would have protected our privacy interest in the documents.

William H. Rehnquist:

After they’ve already copied what they want to copy?

Eric M. Lieberman:

No.

We were asking for return of the copies as well, relief twice afforded in this case by the district court.

William H. Rehnquist:

Well, but to say to return the copies as well suggests that you want an order precluding their use in any future proceedings.

Eric M. Lieberman:

No, that’s not right, Your Honor.

No more true… that is no more true in this case than it was in the Sells case or in the G.M. Leasing case.

In both of those cases… first, take Sells.

In the Sells case, where the grand jury, pursuant to court order, had turned over records to the Civil Department of the Justice Department and the Government claimed that therefore the appeal from that order was moot, the Ninth Circuit and this Court both agreed that the case was not moot because the court of appeals had the power to order the Civil Department of the Justice Department to turn over the originals and the copies of the record, and that would afford partial relief to the individual.

Similarly, in each and every one of the cases involving Federal Trade Commission subpoenas, for which the Government must seek a court order of enforcement, in numerous cases, the similar situation has arisen where in the course of the appeal, because of a lack of a stay, the documents were, in fact, turned over to the Federal Trade Commission and–

William H. Rehnquist:

I thought in Sells, the Court said we can prevent future disclosure or further disclosure.

Eric M. Lieberman:

–Let me be quite clear about that.

William H. Rehnquist:

Well, I think you should be clearer than you were when you just described Sells.

Eric M. Lieberman:

In Sells, the issue was not whether there were going to be further disclosures from the grand jury to the Justice Department.

That disclosure had been–

William H. Rehnquist:

Further disclosures within the Justice Department.

Eric M. Lieberman:

–That’s right.

Further disclosures within the Civil Division of the Justice Department and, as this Court noted in Sells, to prevent the continuing access of those to whom the materials have already been disclosed.

William H. Rehnquist:

So, you’re talking about something that is going to happen in the future.

Eric M. Lieberman:

No.

We are talking about something that’s–

William H. Rehnquist:

Continuing access.

Eric M. Lieberman:

–going on today, tomorrow–

William H. Rehnquist:

Well, but not in the past.

Eric M. Lieberman:

–Not in the past.

That’s right.

William H. Rehnquist:

And so, what good is an order like that to say that the IRS shall not further look at your copies, which perhaps would be the counterpart of the Sells order?

What good is that going to do you?

Eric M. Lieberman:

Well, precisely the same good that it was going to do the person in the Sells case, Your Honor.

William H. Rehnquist:

Well, but the complaint in Sells was that these people were disclosing things among themselves, and that it would keep right on going.

Eric M. Lieberman:

Precisely the same thing as here too.

The IRS has these tapes and is disclosing these things among itself, and the people who have had access have continuing access, just as in Sells.

Similarly, in G.M. Leasing.

Byron R. White:

Well, how is it that so many courts of appeals haven’t really caught on to this argument of yours?

Eric M. Lieberman:

Well, that’s a very good question, Your Honor, and I think if you look at the cases–

Byron R. White:

There are only 10 of them, aren’t there?

Eric M. Lieberman:

–That’s right.

That’s right.

If you look at the cases, other than the Third Circuit cases which, of course, hold in our favor, you have about 28 decisions.

I submit not one of them analyzes the question.

The first case, Lawhon or Lawhon–

Byron R. White:

Well, you mean they haven’t analyzed it like you have.

Eric M. Lieberman:

–I submit that if you look at them, they haven’t analyzed it very much at all.

The first case, Lawhon, Fifth Circuit, appeal dismissed as moot because the documents, says the Fifth Circuit, were already turned over to the IRS and were returned to the taxpayer.

So, that case was correctly decided.

That was moot.

The next case and the next case after that–

Antonin Scalia:

Excuse me.

Were the copies returned to the taxpayer too?

Eric M. Lieberman:

–That’s not clear from–

Antonin Scalia:

Well, then it’s not clear that it was moot.

Eric M. Lieberman:

–Well, that’s true.

Antonin Scalia:

That’s not what you said.

Eric M. Lieberman:

That’s true.

Eric M. Lieberman:

From everything we can tell, it would appear that it was–

William H. Rehnquist:

I suggest you try to be more accurate, Counsel, in your description of the cases.

Eric M. Lieberman:

–Your Honor, the Fifth Circuit in Lawhon specifically stated the documents were returned to the taxpayer.

I don’t know whether there may have been additional copies or not.

But if you look at every subsequent decision, it says we rely on Lawhon… or we rely on the last case, which relied on Lawhon.

This is moot.

There is no analysis in those cases.

The only cases dealing with IRS summons enforcement, which analyzed the question–

Byron R. White:

Well, if I take you literally, every single case was like the Fifth Circuit case; namely, the documents had been returned.

Eric M. Lieberman:

–No, but that’s not true.

Byron R. White:

Well, that isn’t what you–

Eric M. Lieberman:

That’s not true.

That’s precisely my point, Justice White.

In Lawhon, from what we can tell–

Byron R. White:

–All right.

How about the other cases?

Eric M. Lieberman:

–The other cases, the documents weren’t returned, and therefore we think they were incorrectly decided.

Sandra Day O’Connor:

Mr. Lieberman, there’s a similar statute for subpoena power that covers the FTC.

Is that right?

Eric M. Lieberman:

That’s precisely right, Justice O’Connor.

Sandra Day O’Connor:

Is the language of that statute the same as here?

Eric M. Lieberman:

The language of that statute, as with this statute, permits… authorizes the Federal courts to enforce a subpoena order when the FTC brings a proceeding.

In those cases… and here there is a line of authority which is also fairly uniform, and it’s in direct contradiction to the line of authority in the summons enforcement cases.

Sandra Day O’Connor:

There are a series of cases in which the FTC has subpoenaed material in the course of its investigations, I suppose.

Eric M. Lieberman:

That’s correct.

Sandra Day O’Connor:

And in which the appellate courts have held that they still have jurisdiction to order a return of the documents–

Eric M. Lieberman:

That’s correct.

Sandra Day O’Connor:

–subpoenaed and the copies?

Eric M. Lieberman:

That’s precisely correct.

And the Government attempts to make a distinction with the FTC cases by saying that those cases are all adjudicatory subpoena cases and, therefore, that it’s the equivalent of a suppression order, but that’s not true.

Eric M. Lieberman:

Some of the cases are adjudicatory.

Some of them are investigatory subpoenas.

The most recent case, the Invention Submission case, cited in our briefs, in the D.C. Circuit, was clearly an investigatory subpoena, and the Government acknowledged that the case was not moot merely because the documents had been turned over to the FTC because, it said, the documents and the copies can be returned or the copies can be destroyed, just as in Sells.

In the search and seizure area, the Government cites the General Motors Leasing Corporation case to support its view, and quite frankly, I find that rather peculiar because I think, if anything, G.M. Leasing suggests that we are correct in this.

Byron R. White:

Well, why don’t you just say that the case can’t possibly be moot since at least the original of the tapes is your property?

Eric M. Lieberman:

Well, Your Honor, because the original of the tapes is still–

Byron R. White:

Well, whatever–

Eric M. Lieberman:

–with the Superior Court of Los Angeles County.

The Government inspected and copied the tapes.

It did not keep the originals.

Byron R. White:

–And so, you have no right to the copy unless you win the… this case on your ground.

Eric M. Lieberman:

That’s right.

John Paul Stevens:

May I ask kind of a general question that… I always have trouble figuring out what the people are fighting about here.

If I understand, one of your submissions was that the civil investigation is all over.

So, they have no right to keep this stuff.

Eric M. Lieberman:

That’s correct.

John Paul Stevens:

And the other thing that’s in the back of my mind is your… the individual client is deceased now, so there’s no danger of criminal proceedings against him.

What is the risk of something happening to somebody that may be affected by the outcome of this case?

Eric M. Lieberman:

Well, Your Honor, if we’re correct that there is no ongoing investigation, then the risk is simply the risk that any citizen faces in having his or her private papers in the possession of the Government for it to rummage through or use as it wishes when there’s no particular legitimate law enforcement or other purpose for it having done so.

And that is–

Byron R. White:

Well, that’s just some imaginary person.

Eric M. Lieberman:

–Well, I don’t know whether it’s an imaginary person.

This is a live… there is a live party here who has live records involving conversations and private activities which it retains an interest in.

In fact.

Congress specifically recognized this interest.

Byron R. White:

Is it going to hurt your clients if the investigation is all over?

Eric M. Lieberman:

Well, Congress thought it would, Your Honor, because Congress provided a scheme whereby the IRS, when it seeks documents in the summons proceeding… its summons is not self-executing.

It must go to the Federal court.

It must invoke the jurisdiction of the Federal courts to obtain the documents, and it provides the taxpayer with a defense, a defense that the IRS is not entitled to the documents unless it can show, one, that there is an ongoing investigation, and two, that they’re relevant to that investigation.

If there’s not an ongoing investigation, the taxpayer has a right to the privacy of his documents.

William H. Rehnquist:

But that’s just another argument on the merits, isn’t it?

The… you’re saying the district court’s order of disclosure was wrong.

Eric M. Lieberman:

That’s right.

That is our argument on the merits.

William H. Rehnquist:

That’s not an argument why this case isn’t moot.

Eric M. Lieberman:

Well, I was addressing the specific question.

William H. Rehnquist:

You’re addressing the merits of your argument–

Eric M. Lieberman:

Yes.

William H. Rehnquist:

–for reversal of the district court order.

Mr. Lieberman, if the investigation is over, can members of the public gain access to these copies, do you suppose?

Eric M. Lieberman:

No, not under the order that the district court granted in the original case and which the court of appeals affirmed and which this Court affirmed by an equally divided Court.

The IRS is precluded from making those documents public.

Sandra Day O’Connor:

So, the risk of further disclosure is limited to employees of the IRS?

Eric M. Lieberman:

That’s right.

It’s within the IRS for use as it may deem fit and where there is no continuing investigation.

Congress–

Sandra Day O’Connor:

So, it may be a smaller risk, in effect, than would be the case with the FTC, I suppose, where very significant client information or even information about how goods are made or produced could be obtained by the public if they weren’t returned.

Is that… is there a difference at all in the risk?

Eric M. Lieberman:

–Well, I’m not sure that the FTC would ordinarily be free to just make public documents it obtained through a subpoena in a situation like that.

I mean, if it wound up introducing them into a court proceeding, then of course, they would become public.

But in the FTC situation, the party who turned over the documents would certainly have an interest in receiving return of those documents and destruction of copies if the FTC, it turned out, was not conducting an investigation and that they served no legitimate purpose for the FTC.

Congress also… I just want to point out a second way in which Congress has recognized this interest.

When Congress amended section 7609 to provide for the automatic right of a taxpayer to intervene when a summons is directed to a disinterested third-party record holder, Congress took the position that the taxpayer… and this is made manifest in the legislative history… taxpayer may have civil or privacy rights in those documents and thus has a right of intervention, per se, to protect that interest.

Byron R. White:

Have you exhausted your remedies below to get these papers back now that the investigation is over?

Eric M. Lieberman:

I think we’ve done everything that one could possibly imagine.

We certainly sought stays of the production order pending appeal.

Byron R. White:

Well, I know, but what has happened since the investigation is over?

Eric M. Lieberman:

Well, it’s very interesting, Your Honor.

Byron R. White:

Well, have you asked for the papers back where you say, look, the investigation is over, and you’ve made copies of our papers, and we have an interest in getting them back?

Eric M. Lieberman:

Well, not since this case went up, Your Honor.

Eric M. Lieberman:

I must say that.

The Government has maintained its position on this appeal that it has a continuing right to these documents.

If it–

Mr. Lieberman–

Eric M. Lieberman:

–If it… I’m sorry.

Yes?

Antonin Scalia:

–Would you go back?

Am I wrong in my understanding that the Ninth Circuit has already ruled that the crime fraud exception applies to the conversations in question and that, therefore, the documents have to be turned over?

Am I wrong in that?

Eric M. Lieberman:

Well, you’re right that the Ninth Circuit ruled that based upon the evidence before it at the time, the crime fraud exception had been made out, but it did not rule that the documents had to be turned over.

It remanded for further objections, including objection to the question whether the evidence that was the… upon which the Ninth Circuit was ruling was properly before it and also for determination of any further objections the taxpayer might make.

That was the specific basis for the remand.

So, the Ninth Circuit did not end the case.

The Ninth Circuit remanded with an opportunity to make further objections and specifically reserved one of the particular objections we’re making.

David H. Souter:

Could the Ninth Circuit then in this case, instead of dismissing on mootness grounds, simply say the taxpayer has had an opportunity to raise any further objections?

It has not.

The crime fraud exception, therefore, is dispositive and we have already ruled on the case and, therefore, hold against you on that ground.

Eric M. Lieberman:

Well, the issue on the appeal… on the merits of the appeal… of course, we think we were correct that we had meritorious issues.

Certainly it’s possible that we could have lost the appeal.

David H. Souter:

But you think you’re correct, but the Ninth Circuit had held against you.

And could they simply have said you have raised no new evidentiary issue.

There is no investigation, in fact.

I suppose the simple way to do it is that the investigation is over.

There’s no evidentiary issue to raise.

The only possibility for them to bar the IRS from getting this was crime fraud exception.

We’ve already ruled on it.

They’ve lost.

We hold against them on the grounds that we’ve already decided the only remaining issue.

Could they have done that?

Eric M. Lieberman:

Well, it’s conceivable they could have done that, certainly.

David H. Souter:

Well, they would have been right, wouldn’t they?

Eric M. Lieberman:

They wouldn’t, no.

I think they would have been incorrect.

David H. Souter:

Why?

Eric M. Lieberman:

For the reasons I’ve stated.

The remand order left open certain questions.

Those questions… take–

David H. Souter:

Yes, but those… weren’t those questions about evidentiary use?

Maybe I’m not remembering accurately.

Eric M. Lieberman:

–Well, the Ninth Circuit remand order was somewhat–

David H. Souter:

The investigation is over.

There’s not going to be any issue.

If the investigation is over, there’s not going to be any further issue of evidentiary use unless there’s a new investigation, I suppose.

Eric M. Lieberman:

–Well, there was… actually there was never any question of evidentiary use, and the Ninth Circuit’s remand–

David H. Souter:

Well, there never was in the sense that you claim… and perhaps rightly… that there was no such objection that could have been raised, but the Ninth Circuit at least left it open.

Eric M. Lieberman:

–Well, that’s right.

And when on remand… I’m sorry.

On remand, when it went down to the district court, the district court noted that the Ninth Circuit obviously was somewhat confused about the status of the case.

The question wasn’t whether the tapes were to be introduced or not introduced into an ongoing proceeding.

The question was whether they were to be produced to the Internal Revenue Service.

Anthony M. Kennedy:

But that was an explanation for the objections that the Ninth Circuit won’t hear it… heard it.

The order is at page 15a of your appendix, and I agree that it’s imprecise.

But it seems to me the best reading of it is that the Ninth Circuit thought that these were going to be admitted into evidence and said if you have any other evidentiary objections, you can make those objections.

But so far as the crime fraud exception, we’ve ruled.

It seems to me that that’s the most plausible reading of the order.

Eric M. Lieberman:

Well, Your Honor, I must take exception with that, precisely because they footnoted right there the question of not reaching the issue of whether the documents were lawfully obtained.

In addition, there is the additional objection we raised of whether there was an ongoing investigation.

Now, I think the important issue, the thing to keep in mind here, is that the issue before this Court is whether or not our appeal was moot, not whether or not we would have won or lost that appeal.

This is an issue which has broad reference to summons enforcement cases.

As has been noted, there is a split in the circuits on it.

Eric M. Lieberman:

Most of the circuits go against us, and… but most of those circuit decisions against us, I submit, are contrary to parallel lines of authority dealing with the Federal Trade Commission cases, dealing with the Sells Engineering case, and that those cases really do not come to terms with the issues.

I reserve the rest of my time.

William H. Rehnquist:

Very well, Mr. Lieberman.

Mr. Wallace, we’ll hear from you.

Lawrence G. Wallace:

Thank you, Mr. Chief Justice, and may it please the Court:

In the current appeal to the Ninth Circuit that is under review, we argued both that petitioner’s claims were res judicata and that the appeal was moot because all of the materials had, in fact, been produced because of the denial of stays and the originals had been returned.

The court of appeals did not reach our res judicata contentions, but decided only that the appeal was moot.

We argued both that the claims that are being made are claims that have already been resolved against petitioners, and even if some of the claims were not, they could have been raised at the earlier stage, and unlike collateral estoppel, under principles of res judicata, the claims are barred because it’s the same litigation between the same parties, and petitioner is not free to raise these claims seriatim rather than all at once.

But we have not urged the court… we’ve pointed out this obstacle to petitioner’s prevailing, but we have not urged this Court to reach and sort out the res judicata issues which the court of appeals did not reach.

We assumed that the Court granted certiorari to decide the question presented in the petition, which was the mootness question on which there is a conflict in the circuits, and that is what we have addressed.

It’s possible that the Court would conclude that the res judicata obstacle to petitioner’s prevailing is a reason to dismiss the writ as improvidently granted, but we have not urged that either.

Anthony M. Kennedy:

I suppose our problem is that if we’re going to discuss mootness, we should undertake some analysis of the remedies that might be available below, and in this case, it doesn’t look like the petitioner is going to prevail in any event.

And so, it’s just an awkward posture to hear the case.

Lawrence G. Wallace:

It is indeed, and I thought we had satisfied our duty to the Court in pointing out these problems in our brief in opposition, perhaps not as elaborately as one might.

Briefs in opposition are done in quantities.

Sandra Day O’Connor:

Well, Mr. Wallace, I think my concern is really the effect of saying this case is moot, what effect that would have in the FTC context where I think people have a lot at stake there in getting back their documents.

And it seems to me that courts have followed two different tracks under virtually identical subpoena statutes.

Lawrence G. Wallace:

I quite agree with you that the courts have followed a different track, certainly the D.C. Circuit, in the Federal Trade Commission cases.

We would not urge in this case for the Court to resolve how those questions should be decided under the Federal Trade Commission Act.

Sandra Day O’Connor:

Well, I mean, the plain fact is there’s a lot at stake in leaving some of this privileged information in the hands of offices that have no further use for them.

Lawrence G. Wallace:

There can be protective orders, and there are various statutory restrictions on disclosure of confidential information.

The ones in the Internal Revenue Code happen to be among the most comprehensive in any Federal statute.

There are specific provisions in the Internal Revenue Code governing the Service’s disclosure of confidential information.

We summarize these in some detail in the brief that we filed in this Court the last time around in this case in United States against Zolin.

John Paul Stevens:

Yes, Mr. Wallace, but those are statutory protections for the taxpayers.

Lawrence G. Wallace:

That is correct.

John Paul Stevens:

And one of the issues before was whether in addition to the statutory protections, the district court had any authority to enter specific protective provisions.

What’s your position now on that?

Do you still take the position there’s no such authority?

Lawrence G. Wallace:

Well, that is our position in litigation in other cases.

Lawrence G. Wallace:

This Court, by an equally divided Court, affirmed the judgment in this case.

John Paul Stevens:

Right.

Lawrence G. Wallace:

So, that issue is no longer open in this case.

The law of this case is that the particular restrictions entered in this order have been upheld by this Court in affirming that judgment, but we have won an en banc decision to the contrary in another circuit, and we continue to litigate that issue elsewhere.

But that is–

John Paul Stevens:

Isn’t your… can I just kind of ask you?

I’m not as familiar nearly as you are with these new statutory provisions, but the case that runs through my mind is supposing I’ve got some corporate minute books that are subpoenaed, and I resist the subpoena on the ground that it’s not relevant or burdensome or something or other.

And the judge rules against me and says you got to… you must deliver the corporate minute books, and I deliver them.

Could the judge have said, I’m entitled to get copies of those from the… say I’ve complied with the subpoena and delivered the books.

And would the judge say to the… have the power to say to the Government, you must give copies of these… either return them within 30 days or give them copies so they can work… run the office?

Lawrence G. Wallace:

–Well, there probably is authority in dealing with subpoenas under other statutes.

John Paul Stevens:

No, no.

I’m talking about this statute.

Lawrence G. Wallace:

Under this statute, there is a statutory requirement that production, when it’s ordered, be for a reasonable time and under reasonable circumstances.

I’m referring to section 7605(a), and that generally has been understood to mean that we can keep the originals only for a reasonable time and then should return the originals.

John Paul Stevens:

But can the order… my question is really can the district court say to you I think the reasonable time is 30 days, return them after 30 days?

Would that be within the authority of the district court to fix the reasonable time?

Lawrence G. Wallace:

It’s rather seldom done in these summons enforcement orders, but there would be nothing wrong with that because one could even argue that there’s a condition implied in law when the summons is enforced–

John Paul Stevens:

Well, then if he has that authority–

Lawrence G. Wallace:

–that we can only keep the originals for a reasonable time under 7605(a).

John Paul Stevens:

–If the judge has that authority, could he not say there’s no request for it at the time of the delivery?

Could the subpoenaed party go into court 10 days later and say we find we need the documents, would you direct the Government to give us… give them back to us in the next 3 weeks or else give us copies?

Could they do that?

Lawrence G. Wallace:

Well, we think that once a production has occurred, the jurisdiction of the court has ended under the narrow jurisdiction conferred to enforce an Internal Revenue summons, but that the court, as any court does, retains authority to enforce its order.

And if, in fact, an implied in law condition of the order is that the originals can be kept for inspection only for a reasonable time, because that’s what 7605(a) says, then the court retains authority to see whether we have exceeded that implied condition in his order.

John Paul Stevens:

Well, why wouldn’t there be an implied condition in a case like this that the copies… if the original or copies are being used by the Government, they shall not be kept any… for any period of time beyond the time they serve some useful purpose?

Lawrence G. Wallace:

Well, because that–

John Paul Stevens:

If that was an implied condition, then under your explanation, the judge would have the power to say, well, look, you’ve had these things for 7 years and you haven’t done anything.

Give them back.

Lawrence G. Wallace:

–That would be an implied condition that would contradict the overall pattern of statute and decision law concerning judicial anticipation and direction of Internal Revenue Service investigations.

Lawrence G. Wallace:

I think the answer to this case emerges with greater clarity if we put the particular summons enforcement question into the landscape in which the summons authority is placed.

There is… throughout the U.S. Code, there’s a thematic pattern that this Court has recognized in its decisions repeatedly, and that is that Congress has, with only very narrowly delimited exceptions, prohibited preassessment litigation about tax controversies because that litigation could interfere with the Service’s investigatory and collection efforts.

There’s the Tax Anti-Injunction Act.

There’s the Tax Exception to the Declaratory Judgment Act, and there are these comprehensive provisions governing disclosure of confidential information in the hands of the IRS in section 6103, which is very elaborate and detailed with many subsections.

And this applies to a very broadly defined return information which includes any data collected by the Secretary with respect to a return or with respect to the determination of the existence or possible existence of liability under the Code.

So, it would apply to information received through summons enforcement proceedings or received through voluntary compliance with a summons without any court order or otherwise received by the–

John Paul Stevens:

On that very point of voluntary compliance, supposing I turned over the minute books, I got the subpoena, I gave you the minute books, and you used them.

And about 4 years later, I think, gee, I need those because I got to make… bring my minute books up to date.

How does the… what right does the taxpayer have to get those minute books back?

Is there any statutory provision for that?

Lawrence G. Wallace:

–Without a court order in the first place, you said–

John Paul Stevens:

Just… they just complied with the subpoena.

Lawrence G. Wallace:

–turned over by voluntary compliance.

John Paul Stevens:

And then 3 years later, I say, gee, I want those… my records back.

Does he have a right to get the records back, and if so, what is the statutory basis for getting them back?

Lawrence G. Wallace:

The answer would be that he could sue for a violation of his rights to get his property back the way he would from any other agency of the Government that property has wrongfully been withheld.

John Paul Stevens:

Is there any statutory provision–

Lawrence G. Wallace:

There’s no particular statute.

John Paul Stevens:

–Sort of the common law rights of–

Lawrence G. Wallace:

He would have to… he would have to do that and bring a Federal question case and come within the very narrow exception to the Tax Anti-Injunction Act that this Court has recognized.

The leading case is Enochs against Williams Packing Company, 370 U.S. 1, a standard that was articulated with great care.

If it’s clear that under no circumstances could the Government ultimately prevail under the most liberal view of the law and the facts, then there is this narrow exception to the Anti-Injunction Act, which the Court reaffirmed that standard in Commissioner against Shapiro in Volume 424 U.S., and that would be the only avenue.

William H. Rehnquist:

–Well, what does the… what does the statute requiring production for the IRS… does it say anything more than that the taxpayer shall produce certain books?

Lawrence G. Wallace:

Nothing more than that at all.

William H. Rehnquist:

Well, certainly that can’t contemplate that the property interests in the books turns… goes over to the Government.

Lawrence G. Wallace:

Well, that is correct, Your Honor, and we can only examine them for a reasonable time, but we can during that time and, of course, in the modern practice, make copies of them.

Or in some instances, records are now on computers, and we just get a printout that they don’t even want back.

William H. Rehnquist:

But the originals of these records have been returned to where they got them from–

Lawrence G. Wallace:

That is correct.

William H. Rehnquist:

–which is the clerk of the Superior Court.

Lawrence G. Wallace:

That is correct.

And the controversy now is about getting us to turn over the copies that we made.

The copies were not anyone else’s property.

They are a form of fruits of the original disclosure.

Sandra Day O’Connor:

Mr. Wallace, there were two previous occasions when the tapes were surrendered to the IRS and then ordered returned.

Did those both deal with the originals, or did those orders deal also with copies?

In this case, were there not two previous occasions?

Lawrence G. Wallace:

They were and they dealt with the originals.

I don’t know whether they also dealt with copies, but I know they dealt with the originals.

Sandra Day O’Connor:

Did the Government in those cases… in those instances argue mootness or raise this same–

Lawrence G. Wallace:

We did not because, as I recall, we had not even made copies at that point, as we explained in our brief.

So, whether the order would have addressed copies or not, there were no copies to be turned over.

And our view… we’ve set this forth in a footnote… is that the proceeding had not become moot at that point because this wasn’t full production until we had an opportunity to examine and use the materials.

So–

John Paul Stevens:

–Mr. Wallace, can I ask you another question about… just a general question, not the details of this very complex case.

You’ve explained to me that when there’s a production of originals, there’s a kind of an implied condition of keeping them for a reasonable period of time.

Is there also an implied condition that if the Government decides to make copies and return the originals, that the copies will be returned within a reasonable period of time if they’ve served their purpose and so forth?

Lawrence G. Wallace:

–The copies are not to be… we recognize no obligation to return copies to anyone.

John Paul Stevens:

So, your view is–

Lawrence G. Wallace:

The copies are not anyone else’s property.

John Paul Stevens:

–Just so that I understand this, if you do manage to get… successfully subpoena something and overcome an objection to production, you have an absolute statutory right to retain copies forever.

Lawrence G. Wallace:

Well, of course, we don’t for our own purposes do that.

John Paul Stevens:

I know you don’t do that, but that’s what the law would authorize you to.

Lawrence G. Wallace:

But that is correct, as well as anything else that we have learned in our investigation as a result of having scrutinized the originals, whether we made copies or not.

John Paul Stevens:

No.

I understand.

But just so I’m clear on it, your position is that the law entitles you to retain the copies forever if you lawfully get possession of the originals pursuant to a subpoena.

Lawrence G. Wallace:

Copies like notes or like further–

John Paul Stevens:

I mean, the answer is yes.

Is that right?

Lawrence G. Wallace:

–The answer is yes.

Copies like notes or like further inquiries that we made on the basis of scrutinizing the original are a species of fruits.

They are not the original materials that were produced.

In their reply brief in support of their petition, what petitioners emphasize… and I’m reading from their reply brief at the top of page 4.

Effective relief is available to the Church here by way of an order that the tapes and any documents derived from the tapes be returned to the custody and control of the district court, and that any information derived therefrom not be further disclosed to any other person or otherwise used by the IRS which would effectively return the parties to the status quo ante.

David H. Souter:

Mr. Wallace, leaving aside the question of whether that argument should succeed or not, are they barred from raising it below?

Lawrence G. Wallace:

Well, we think that it was all res judicata, but as I said, we argued that to the court of appeals, but they didn’t reach that argument because they accepted our other argument, that the contention was moot.

David H. Souter:

But it’s not moot if, in fact, they may raise this issue.

So, are you saying that the mootness issue necessarily subsumed this claim?

Lawrence G. Wallace:

Well, that… they do… there is a controversy asserted between the parties.

Our position is that that controversy is not right, that that is a premature claim, as this Court said in the G.M. Leasing claim.

David H. Souter:

Okay, no.

I recognize that as being your position, but so far as their opportunity to raise that issue and for you to assert that position now, you’re saying that the mootness determination necessarily subsumed that.

Lawrence G. Wallace:

Well, that is the mootness issue.

They say that that’s–

David H. Souter:

So, that’s properly… so, that’s properly before us.

Lawrence G. Wallace:

–Exactly.

They say that that’s–

David H. Souter:

And if we think that issue ought to be explored, we could remand for that purpose.

Lawrence G. Wallace:

–Well, but the–

David H. Souter:

Couldn’t we?

Lawrence G. Wallace:

–Well–

David H. Souter:

Couldn’t we say that they were entitled to explore that on the merits before the Ninth Circuit and they were not allowed to do so?

Lawrence G. Wallace:

–Well, that is the mootness question.

The Ninth Circuit correctly in our view agreed with all other circuits except the Third by saying that once production had occurred under this summons enforcement order, the summons enforcement proceeding was ended, and therefore the case is moot regardless of the merits of these claims.

The only reason to reach–

William H. Rehnquist:

Well, your–

Lawrence G. Wallace:

–the merits if they’re correct on mootness.

David H. Souter:

–Well, did they… excuse me, Chief.

No, I was going… did they specifically make the argument below about the… about legitimate restrictions on use that a court could enforce against you, or did they attempt to make that argument below?

Lawrence G. Wallace:

Well, there were restrictions on use in this order that this Court upheld by an equally divided Court last time around, United States against Zolin.

David H. Souter:

Were they the same rescrictions that they’re talking about now?

Lawrence G. Wallace:

No.

Now, they’re asking for further relief.

David H. Souter:

And so, you’re saying they should have raised any request for restriction the first time around, and that goes back to your argument they can’t raise these things seriatim.

Lawrence G. Wallace:

That is correct.

David H. Souter:

Yes, okay.

Lawrence G. Wallace:

That’s our res judicata point, but that’s not our argument to this Court.

William H. Rehnquist:

I recognize that.

Well, your position with respect to one of these issues, Mr. Wallace, is that, I take it, that since you cannot, under G.M. Leasing, forbid future use in yet unbrought proceedings, that is not a form of relief which they could obtain that would do them any good to prevent them from being moot.

Lawrence G. Wallace:

That is not a form of relief open to the district court sitting in a summons enforcement proceeding, and therefore the summons enforcement proceeding, which is all that the court of appeals had before it, is moot.

That is correct.

That is our position, and that–

Antonin Scalia:

Mr. Wallace, why isn’t… you acknowledge that any implicit terms of the order can be enforced by subsequent action of the court.

Why isn’t a reasonable implicit term of an order to produce that if I, the district judge, am wrong about my decision that these documents must be produced, why of course the Government will return them and all copies of them, since they shouldn’t have had them in the first place?

Why isn’t that a reasonably implicit term?

Lawrence G. Wallace:

–Well, because there’s no statutory requirement that the Government return copies or other fruits of the disclosure after the disclosure has occurred.

Antonin Scalia:

I know that, but that’s why it’s implicit.

I acknowledge there’s no explicit statutory requirement, but isn’t it fairly implicit?

If I may just add a further note to that, that’s the question before us, isn’t it?

Lawrence G. Wallace:

The question before you is whether that contention can be made in a summons enforcement proceeding after the records have been produced, whether that proceeding can extend to monitoring of the IRS’ investigation by requiring that what the IRS has learned from the production be expunged from the IRS’ records in one way or another.

David H. Souter:

So, we could properly decide the case based on Justice Scalia’s suggestion.

Lawrence G. Wallace:

One could decide it except there is no statutory basis for it as there is for return of the originals after a reasonable time–

John Paul Stevens:

I thought the return of the originals–

Lawrence G. Wallace:

–in 7605(a).

John Paul Stevens:

–after a reasonable time was also implied.

Lawrence G. Wallace:

I said it’s implied because of the… it’s implied in the order because it’s express in the statute.

It’s not implied in the statute.

Byron R. White:

The Government doesn’t have the original anymore anyway, does it?

Lawrence G. Wallace:

It does not.

Lawrence G. Wallace:

It has returned the originals.

That’s what this–

Byron R. White:

But when did you make the copies?

Lawrence G. Wallace:

–I can’t tell you precisely.

I don’t even know if the record even shows it.

Byron R. White:

Well, at the second time… the second time that the Government was ordered to return the documents, on March 13 the district court ordered that any copies of the tapes and any notes or transcripts in possession of the Government be returned to the district court.

On March 14, 1991, the Government complied with that order.

Did they comply with that order?

Lawrence G. Wallace:

Yes, we had nothing but the originals.

Byron R. White:

So, the copies–

Lawrence G. Wallace:

And we returned them.

We hadn’t made the copies at that point.

Byron R. White:

–Oh, when did you make them?

Lawrence G. Wallace:

We made them later after we got the records on this last go-around from the district court.

Byron R. White:

Yes, but at the time of this order, the original had already been returned, I think.

Lawrence G. Wallace:

But then we got them back in this latest round at the district court.

All of these details about the case really only obscure what is the legal question, which is whether, as we contend, the limited jurisdiction given to the district courts to decide under the statutory language that we have set out on page 15 of our brief at the top to decide whether to compel production in whole or in part or to deny production, extends to something beyond doing what the statute says, issuing an order about whether the records should or should not be produced depending on whether we’ve made the showing required in Powell.

This is a summary proceeding.

Both this Court and Congress have said it’s a summary preemptory proceeding that is just used because the summons is not, like most administrative summonses are not, self-executing, self–

Anthony M. Kennedy:

But the statute says that the court exercises its jurisdiction by appropriate process.

Is your position that that is narrower than if it said by appropriate order, or is that the same?

Lawrence G. Wallace:

–I think it’s really the same.

It amounts to–

Anthony M. Kennedy:

So, by appropriate order, wouldn’t… if we can interpolate that with your consent, would that not indicate that the court can use its discretion in protecting the interest of the owner of the documents?

Lawrence G. Wallace:

–Well, as I started to explain, to some extent, to the extent that it doesn’t contradict other provisions of the Code.

Anthony M. Kennedy:

Well, it’s just as a condition to their being produced.

Lawrence G. Wallace:

Yes, and there were conditions imposed here which were upheld by the court.

We’re not quarreling with that at this point, although we do in other cases.

We think that the Code itself has a system of remedies for improper disclosures and specifies what disclosures and for what purposes may be made with elaboration about redactions and the like.

Anthony M. Kennedy:

But if the court could make all of those orders in conjunction with the production order, surely it could retain jurisdiction.

Lawrence G. Wallace:

It retains jurisdiction to enforce its order.

We admit that.

Other than that, the court… the proceeding is over once production has occurred pursuant to the order.

Antonin Scalia:

Mr. Wallace, what about the originals?

Suppose on appeal the appellate court found it was wrong to compel the production of the originals.

Do you contest that the district court can require the originals to be returned?

Lawrence G. Wallace:

Well, as I said, because of 7605, we can only inspect originals that belong to the person on whom we’ve served the summons for a reasonable period of time.

So, that could be an implied in law condition in the order.

Antonin Scalia:

Oh, no.

I’m not talking about a reasonable period of time.

It’s still a reasonable period of time.

There’s a really quick appeal.

It’s still a reasonable… well within the reasonable period of time for the IRS to hold them, but they’ve been wrongly required to be produced, and the court of appeals tells the district court you did… you made a mistake.

Can the court of appeals get them… require them to be given back?

Lawrence G. Wallace:

Well, I think the case would have been moot before the court of appeals on the merits of the production order.

Antonin Scalia:

You have to take my hypothetical, Mr. Wallace–

Lawrence G. Wallace:

Yes.

Antonin Scalia:

–and how I’ve given it there.

Lawrence G. Wallace:

Well, I’m taking your hypothetical.

The materials were produced.

That made the case moot except for enforcement of the district court’s order.

Antonin Scalia:

Cannot even get the originals back.

So, it’s no use taking an appeal then, I guess.

Lawrence G. Wallace:

He can take an appeal if he thinks the–

William H. Rehnquist:

You have to get a stay.

Lawrence G. Wallace:

–district court has misconstrued his order and is erring in not enforcing it properly.

And that would become something of a legal question rather than a question about the particular order if the provision being enforced is one implied by law.

But, of course, stays are available.

The issue in the stay here was–

John Paul Stevens:

Well, I thought your position was he had to–

Lawrence G. Wallace:

–whether the case would become moot.

John Paul Stevens:

–put himself in contempt of court in order to appeal.

He has to just not produce the documents, but if he does produce them, even if he… the judge was wrong, that’s the end of the ball game in your view.

Lawrence G. Wallace:

That’s the end of this proceeding.

Byron R. White:

Well, how does one ever enforce against the Government the obligation to return the original within a reasonable time?

The case is moot.

Lawrence G. Wallace:

The summons enforcement case is moot except for enforcing the order compelling the summons.

If the materials were voluntarily given over, there has to be an original proceeding brought that is within the Enochs against Williams Packing exception to the Tax Anti-Injunction Act.

That’s the only way to do it.

David H. Souter:

Well, that might be for return of property.

Lawrence G. Wallace:

Right.

David H. Souter:

But is that going to be broad enough to allow for restrictions on use?

Lawrence G. Wallace:

We don’t think restrictions on use are proper to be posed.

David H. Souter:

You agree… certainly you don’t think there should be any restrictions on use, but if a taxpayer wants to raise it, can he at least have a shot at raising it by the process you describe?

Lawrence G. Wallace:

Well, some of the cases we have cited in our lengthy footnote about the Tax Anti-Injunction Act were ones that said that attempts to get restrictions on use were not within the Enochs against Williams Packing Company exception.

David H. Souter:

So, therefore, if that’s the law, he will never have an opportunity to raise a restriction on use unless he, in effect, refuses to turn it over, unless the Government agrees to such a restriction.

Lawrence G. Wallace:

Or until proceedings are brought against him, which is the time to move–

David H. Souter:

For involuntary–

Lawrence G. Wallace:

–for suppression–

David H. Souter:

–Right.

Lawrence G. Wallace:

–under this Court’s jurisprudence and not in an anticipatory way getting the courts in to supervise and delay the conduct of IRS investigations and collections.

That’s what Congress has said… it should not be done.

Byron R. White:

You would say to wait in this case wouldn’t do them any good because it’s res judicata.

Lawrence G. Wallace:

Well, it happens to be res judicata in this case.

That’s correct.

And I would have a lot of basis for saying it.

William H. Rehnquist:

Thank you, Mr. Wallace.

Mr. Lieberman, you have 3 minutes remaining.

Eric M. Lieberman:

Thank you, Your Honor.

Mr. Wallace is incorrect in stating that the Government never made copies and never returned copies previously.

Eric M. Lieberman:

As we point out on pages 9 to 10 of our reply brief, the Government made seven copies of the tapes and they reduced them to two cassette tapes and a computer disk.

Byron R. White:

When?

Eric M. Lieberman:

When the Government returned the copies on March 14, 1991, after having received them the second time… and this is noted on the docket–

Byron R. White:

So, they had copies at the time the… that the district court ordered them to return the copies.

Eric M. Lieberman:

–That’s right.

They had had them for 50 days.

Their action–

Byron R. White:

Had they had copies at the time the district court first ordered them to return?

Eric M. Lieberman:

–Yes, they did, and those were returned as well.

Byron R. White:

And yet, the Government never claimed the case was moot at that time.

Eric M. Lieberman:

That’s precisely correct, and by their action in seeking them for a third time, they thereby demonstrated that the case was not moot because the relief had been effectual.

Anthony M. Kennedy:

Well, did they have–

Eric M. Lieberman:

They needed them again.

Anthony M. Kennedy:

–Did they have copies of each and every document?

Eric M. Lieberman:

Yes, absolutely.

Byron R. White:

Well, so the Government is just wrong in saying that they didn’t have copies.

Eric M. Lieberman:

That’s precisely correct.

Byron R. White:

How do we know that?

Eric M. Lieberman:

It’s in the record, Your Honor; if you look at the docket sheet on items number 75 and 77 on pages 74 and 75 of the excerpts of record.

I just want to clarify one other point.

We are arguing that there was no legitimate purpose… no legitimate investigation at the time of the disclosure order, and therefore the Government never had a right to obtain the documents, not that at some reasonable time thereafter, the documents had to be returned.

Therefore, the original jurisdiction of the court invoked by the Government pursuant to an act of Congress was still applicable.

Antonin Scalia:

But you know, there are other areas of the law where you… you’re compelled to stand on your rights.

If you want to challenge the Government action, you have to do it right then and there, take your chances.

That’s not unheard of.

Why isn’t this… why isn’t that appropriate here in this area, where Congress has displayed great sensitivity about staying the process of tax collection?

Eric M. Lieberman:

Well, you raise a very interesting question which we raise in this case, Your Honor.

We had no opportunity to stand on our rights because this summons was directed to a disinterested third-party record holder, and in… we particularly urged that in that context, the case cannot be deemed as moot because even if in the taxpayer disclosure situation, you can argue that the taxpayer, albeit it under threat of contempt, gave up his interest in the controversy, that certainly can’t be said as here–

Antonin Scalia:

Yes, I had forgotten that.

Eric M. Lieberman:

–where the taxpayer had no opportunity to do so.

Eric M. Lieberman:

Thank you very much.

William H. Rehnquist:

Thank you, Mr. Lieberman.

The case is submitted.